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Valmont Industries Inc. Reports Operating Results (10-Q)

October 29, 2012 | About:
10qk

10qk

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Valmont Industries Inc. (VMI) filed Quarterly Report for the period ended 2012-09-29.

Valmont Industries, Inc. has a market cap of $3.52 billion; its shares were traded at around $132.3 with a P/E ratio of 16.2 and P/S ratio of 1.3. The dividend yield of Valmont Industries, Inc. stocks is 0.7%. Valmont Industries, Inc. had an annual average earning growth of 13.3% over the past 10 years. GuruFocus rated Valmont Industries, Inc. the business predictability rank of 4-star.

Highlight of Business Operations:

The increase in EIP segment net sales in the third quarter and first three quarters of fiscal 2012, as compared with 2011, was due to improved sales volumes of approximately $4 million and $34 million, respectively, and $6 million and $17 million, respectively, of favorable pricing and sales mix changes. These increases were offset to a degree, by unfavorable foreign exchange translation effects of approximately $6 million and $14 million, respectively. North America lighting sales in the third quarter of 2012 were comparable with 2011, while sales in the first three quarters of 2012 were up modestly over last year. The increase in sales mainly resulted from higher sales prices and favorable sales mix. The transportation market for lighting and traffic structures continues to be steady but not particularly strong. While a two-year extension to the current U.S. highway funding legislation was enacted in the third quarter, this event has not yet affected the market for lighting and traffic structures. We also believe that state budget issues are limiting roadway project activity. Sales in other market channels such as sales to lighting fixture manufacturers and commercial construction projects in 2012 were comparable with 2011. In Europe, sales in the third quarter and first three quarters of fiscal 2012 were lower than the comparable periods in 2011. We divested of our Turkish and Italian operations in late 2011, resulting in lower sales in the third quarter and first three quarters of 2012, as compared with 2011, of $5.2 million and $13.6 million, respectively. Current economic conditions in Europe and weak and uncertain. As a result, public spending for streets and highways is under pressure, as governments dealing with lower tax receipts and budget deficits. However, lighting sales in local currency were higher in the the third quarter and first three quarters of 2012, as compared with 2011. Stronger sales in France, Scandinavia and the U.K. were offset somewhat by weaker sales volumes in northern Europe.

Operating income for the segment in the third quarter and first three quarters of fiscal 2012 was higher than 2011. Improved operating income resulted from higher sales volumes, improved sales prices and moderating raw material costs (including $2.6 million of lower year-to-date LIFO expense), offset somewhat by factory operational inefficiencies of $5.2 million and $12.3 million, respectively. The factory operational inefficiencies related mainly to start-up costs related to capacity expansion in the U.S. and certain production inefficiencies in Europe. The increase in SG&A spending in the third quarter and first three quarters of 2012, as compared with 2011, mainly was attributable to higher compensation costs of $2.2 million and $6.2 million, respectively, and increased employee incentives of $1.1 million and $2.8 million, respectively. These increases were offset to a degree by currency translation effects of $1.2 million in the third quarter and $2.4 million in the first three quarters of fiscal 2012, as compared with the same periods in 2011.

Operating income in fiscal 2012, as compared with 2011, increased due to the increase in North America sales volume, moderating raw material costs and leverage effects on fixed SG&A and factory expenses. These positive effects were offset to a degree in the third quarter and first three quarters of 2012 by $1.3 million and $8.4 million, respectively, of additional costs associated with production inefficiencies and unanticipated costs related to certain large orders. The increase in SG&A expense for the segment in fiscal 2012 as compared with 2011, was mainly due to increased employee compensation of $1.3 million and $2.8 million, respectively, increased employee incentives of $0.7 million and $1.2 million, respectively, and increased sales commissions of $0.3 million and $1.2 million, respectively, all associated with the increase in business levels and operating income.

The increase in Irrigation segment net sales in the third quarter and first three quarters of 2012, as compared with 2011, was mainly due to improved sales volumes of approximately $10 million and $55 million, respectively, and favorable pricing and sales mix of approximately $2 million and $19 million respectively. These increases were offset by unfavorable currency translation effects of $5.6 million and $10.9 million in the third quarter and first three quarters of 2012, respectively, as compared with 2011. The pricing and sales mix effect was generally due to sales price increases that took effect in the second half of 2011 to recover higher material costs in early 2011. In global markets,

Operating income for the segment improved in the third quarter and first three quarters of 2012, as compared with 2011, due to improved sales unit volumes and improved sales prices in light of stable material costs. The higher average selling prices resulted from rising material costs in 2011, when sales price increases lagged material cost inflation. The stability in raw material purchase costs also resulted in $4.7 million in lower LIFO expenses in the first three quarters of 2012, respectively, as compared with 2011. SG&A expenses in the third quarter of 2012 were slightly lower than the same period in 2011, due in part to foreign currency translation effects ($0.5 million). On a year-to-date basis, SG&A spending increased in 2012 over 2011, due to increased compensation cost to support the increase in sales activity ($2.4 million), offset to a degree by currency translation effects of approximately $1.2 million.

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